Hochberg: 'No' on HISD's Prop. 1 is an expensive gamble

If HISD doesnât pay its recapture bill, the Commissioner of Education will remove enough commercial property from HISDâs tax rolls to reduce the districtâs property tax collections by the amount it owes.
HISD loses the recapture money, one way or another, even if it doesnât actually write a check. And the state gets its money one way or another, because the taxes from the removed properties will go to a poorer district in Harris County, letting the state reduce its funding to that district..(Chronicle File Photo)

Photo: Marie D. De Jesus, Staff

A "yes" vote on HISD Proposition 1 costs less for HISD taxpayers than a no vote, with no downside. It's that simple.

A "yes" vote would allow the Houston Independent School District to write a "recapture" check to the state. That's bad, but the alternative is worse.

Those who urged a no vote on this same question last fall told us that voting no would force the legislature to "fix the system" so that HISD wouldn't have to pay recapture. But there's been no such legislative fix considered, and the legislative session ends in about a month. The threat hasn't worked.

Now, if HISD doesn't pay its recapture bill, the Commissioner of Education will remove enough commercial property from HISD's tax rolls to reduce the district's property tax collections by the amount it owes.

HISD loses the recapture money, one way or another, even if it doesn't actually write a check. And the state gets its money one way or another, because the taxes from the removed properties will go to a poorer district in Harris County, letting the state reduce its funding to that district.

But here's the thing.... If HISD writes a check to the state, it loses only the amount of the check. But, if the district gives up taxable property, it loses the recapture amount, plus all the bond taxes the district would have collected off that property.

That means the tax rate we all pay for bond payments, now and in the future, has to go up to make up for the taxes lost from the lost property.

Once the property is gone, it's gone forever. No take backs or fingers crossed. Yes, the Legislature could change the law in the future and allow the property to come back, but that's unlikely since taking the property back could then substantially raise the bond tax rate in the poorer district.

Voting no is like giving away your garage to avoid paying property taxes on your house. That's why no district in the state has ever chosen the option of having property removed instead of sending a check. It's a bad deal.

So why didn't the Legislature just fix the system?

First, school funding is a hard problem to solve. A system based on local property taxes is inherently hard to make fair. A fix that eliminates recapture for HISD requires money, lots of it, which either must come from reducing payments to other districts, taking large amounts from other areas in the state budget, or new taxes. None of those are popular right now. They never are.

That's why the only major changes to the school finance structure in Texas in at least the last 30 years have been in response to court orders. The Texas Supreme Court reviewed the school funding system last year, but refused to order any changes.

Second, nobody from Houston has offered a solution. In 20 years in the Legislature, I never saw anyone solve a major problem without at least offering a plan as a starting point.

Third, a fix means different things to different people. To some, it means more state funding for schools. To others, it means just lowering taxes. When the court ordered the Legislature to fix school funding in 2005, the legislature responded by using additional state funding to reduce local property taxes, but didn't increase state taxes enough to cover the cost. That led to large cuts in school funding later.

Without a plan or a consensus, much less a court order, those who argue that a no vote will pressure the governor to call a special legislative session to fix school funding could end up with a "fix" they don't want.

I agree that the school finance system is a mess. Cuts in state education funding have forced districts to depend more on local property taxes. So, as property values have risen again, more districts are considered "rich," which is the trap that caught HISD.

But it's not just a problem of rich districts vs. poor. A bigger problem for our whole area is that the state's funding formula has never fully provided for the cost of educating low-income students and English language learners. When those parts of the formula were created in the 1980s, they were set at half of what the data showed was needed, as "a start."

Thirty years later, they haven't changed.

Those formula shortfalls hurt all districts in our area that serve those students, whether they are recapture districts or whether they receive money from the state. Instead of seeking short-term aid for property-rich districts, HISD would be better off joining with districts that have similar demographics to fight for formula updates, so that HISD would no longer be considered rich.

Fixing these problems will not be easy politically or financially. But gambling on a more expensive option for HISD taxpayers is a poor way to start.

Hochberg is a former state representative of southwest Houston from 1993-2013. He served as a member of the House Committee on Public Education his entire 20 years in the Legislature.